Why is Bitcoin Valuable?

Short answer... as a digital money, Bitcoin works.

A digital money must offer a reliable way for users to hold and protect their money.

and

A reliable way for users to send money from one account to another.

Bitcoin does both very well.

Bitcoin works on a global scale, allowing people to transact with each other directly.

Bitcoin is live 24/7/365. There are no down times or off days.

Bitcoin is free of dispute. All transactions and account balances can be proven and verified. It's all on the list.

Bitcoin operates without the control of a central party, government, or corporation. This is vital as it would be impossible for people all over the planet to agree on that one party.

Put it all together... Bitcoin is digital money that works, with over $100,000 transferred every second.

Truth is though, you might only be able to see Bitcoin’s value up to the extent in which you think the world needs a digital money.

So to explore, let’s look at two groups of people and their reasons for why the world needs Bitcoin.

Institutional Investors

Financial Technologists

Institutional Investor

Def 1 - A company that invests on behalf of other people.
Examples include mutual funds, investment firms, and pensions.

Def 2 - Corporations that own Bitcoin.
Examples include Tesla and Square, Inc.

To an institutional investor, Bitcoin has value as a hedge against inflation.

Just what is inflation? Inflation is when the value of money decreases with time.

There is valid reason to be concerned about this, especially concerning the US Dollar. Bitcoin launched in 2009. In the time since, the total number of dollars in exsistence has quadrupled.

The total supply of dollars is expanding, or inflating. Nobody knows how many dollars will be created.

Bitcoin stands in stark contrast to the US dollar. We know exactly how many Bitcoin there will be.

21 million.

In Bitcoin the size of the whole pie stays the same size. This rule is built into the code.

Insitutional Investors are increasingly acquiring Bitcoin.

They see value in a digital money with a total supply that is capped.

They see owning Bitcoin as a protection from currency inflation.

Financial Technologist

Def - an expert in the technology that operates and underlies the financial sector.

To a financial technologist, Bitcoin has value as a new invention.

A common superlative thrown at Bitcoin is that it represents the “internet of money.” What the Internet did for the exchange of information, Bitcoin could do for the exchange of money.

It’s a comparison meant to conger up growth potential.

To take the analogy a step further. Bitcoin might best be compared to the e-mail of money. Which is to say, Bitcoin might be the simplest and most mundane way of using the “internet of money”.

Bitcoin is still in its early stage of being the "internet of money."

It's hard to foresee what growth and changes will come to Bitcoin. Harder yet to predict what new things Bitcoin will bring to the world. We can't yet articulate what an "internet of money" opens up in the future world.

For now, it's important to understand that financial technologists see value contained in the growth potential of Bitcoin. They feel the world is shifting digitally, and it's time for a new form of money that works and operates within the digital realm.

There is value in the potential of Bitcoin to change the world of finance and money.

This answer is abstract, and truthfully the financial technology behind Bitcoin deserves its own entire write-up. We're working on it... it's coming soon.

Before we conclude...

we think it’s worthwhile to flip the question and ask “Why does paper money have value?

By design, paper money has no instrinsic value. The paper they print dollars on is not worth anything. Paper money is a placeholder for "real" value.

And that's where we get to the definition of paper money:

Paper money is a placeholder of value, constructed of worthless materials, that can be easily exchanged.

The reason paper money is valuable is because it is accepted all over the place. This acceptance is enforced with the full weight of a government.

There is no instrinsic value in the paper that money is printed on.

Bitcoin is the same, the digital coins themselves contain no intrinsic value. In a sense, Bitcoin is simply digital paper.

Why is Bitcoin Valuable?

Bitcoin's value comes from its utility.
As a digital money, it works.
It's global, there are no down times, and it functions without a central governing party or corporation.

Bitcoin has value because it is accepted.
It's accepted by the users who own and send Bitcoin.

It's accepted by the miners who pay money to operate the network.

It's accepted by institutional investors and financial technologists.

Bitcoin's acceptance or network effect, is by choice rather than enforcement.

No other money can say the same.